“The EFF is seeking over $400,000 in attorney’s fees from Universal Music Group after Universal
sent aDMCA takedown notice
to YouTube, demanding the removal of a video posted by user
Stephanie Lenz. Lenz had posted a video of her toddler dancing to a 30-second clip of
the Prince song “Let’s Go Crazy”; after Universal sent the takedown notice, the EFF sent YouTube
a counter-notice on behalf of Lenz arguing that the video was fair use, and YouTube restored
it. Now the EFF is asking the judge to award them attorney’s fees for their work.” Use your magical clicking device below to read many more words.

Section 512(f) ofthe DMCA
says pretty clearly that anyone who “knowingly materially
misrepresents under this section… that material or activity is
infringing… shall be liable for any damages, including costs and
attorneys’ fees”, which would seem to apply here; the EFF argues that Universal should have
reasonably known that the video obviously constituted fair use.
In a Law.comarticle about the case,
attorney Kelly Klaus, representing Universal, countered that
“Congress also said that there was another remedy, which is the counter-notice procedure,
which is what happened here.” But this seems to miss the point — the DMCA says
that the remedies are the counter-notice procedure and an award for attorney’s fees.
(Klaus’s firm did not respond to requests for comment for this article.)
Anyway, as EFF staff attorneyCorynne McSherry points out, if there were no
possible award for attorney’s fees against copyright holders who make false accusations, then there
would be no disincentive for copyright holders not to file frivolous accusations in the first
place.

I’m an EFF member and support their request for attorney’s fees, but let’s play devil’s
advocate. Suppose you were an indie musician who sold your songs online, and you found
a number of YouTube videos that used your song without permission, so you sent along list
of DMCA takedown notices to YouTube. Included in that list was one video that used only
a brief portion of your song, short enough to count as fair use.
Is $400,000 a fair punishment for accidentally including one video in your list that wasn’t
a bona fide copyright infringement?

On the other hand, if the EFF doesn’t get their attorneys fees, then they have to eat the cost
of the work they did, and that doesn’t seem fair either.

The problem is that once you have a $400,000 bill on the table, someone has to pay it,
which punishes one or both parties usually vastly out of proportion to any wrongdoing.
($400,000 is almost half of what Reebok had to pay when one of their lead-tainted
braceletskilled a child.)
Huge attorney’s fees awards also limit
access to the court system for plaintiffs who might have a reasonable case, but can’t
afford the risk of having to pay attorney’s fees if they lose, and for defendants who might also
have a reasonable case, but are under pressure to settle quickly to avoid the risk of a huge
attorney’s fees award against them.

This suggests an economics / game theory problem: Could you come up with a system that takes into
account the incentives of parties on both sides, and that prevents huge legal bills from being
generated?

Now, any argument about the legal system usually raises two kinds of objections. The first is
that the existing system “works”. Well, in many ways it does, but everybody also knows that wealthy
corporations and individuals enjoy a huge advantage in the court system, even though courts are
supposed to treat all parties equally. So at least in that respect it doesn’t “work” the way it’s
supposed to. The second objection is that it’s too hard to change the rules and traditions that
are built into legal proceedings, so it’s better just to work within the system. True, but that’s
not the question I’m asking. I’m posing it as a logical brainteaser: If you had carte blance to modify
the way that legal disputes were held, could you do it in a way that respects the rights and interests
of all parties and still minimizes the legal fees incurred? (Whether I’m right or wrong,
my goal is to make this argument
more interesting to mathematicians and game theorists, than to lawyers; otherwise, I’ve failed.)

From a game-theoretic point of view, you might argue that large attorney’s fees serve a useful purpose
by discouraging frivolous lawsuits. The problem is that the fees don’t just discourage frivolous
lawsuits but also non-frivolous lawsuits where there’s a reasonable chance of losing. On the other
hand, a person who is already broke would have little disincentive to file a frivolous lawsuit, since
the worst that can happen is that they’d get hit with a huge award for attorney’s fees and have to declare
bankruptcy, which they might consider worth the risk for a small shot at a million-dollar payout.
So assume that attorney’s fees are not themselves the best way to deter frivolous lawsuits,
and that avoiding large fees in general is still a desirable thing. How do you design rules to
achieve that?

I think you could save a lot of money by enforcing a rule that a lawyer is not allowed to seek attorney’s
fees from the other side for arguing any points that the other side offered to concede anyway.
So the incentive would be that if party A’s lawyer concedes some point of fact or point of law,
and party B ultimately wins the case and an award for attorney’s fees, then party B is not allowed
to seek attorney’s fees for arguing the point conceded by party A’s lawyer.

In all of my legal cases where the other side was represented by a lawyer who was getting
paid by their client up front, it was clear
from reading the other side’s briefs (and my own lawyers agreed with me) that opposing counsel had
spent a lot
of time spinning their wheels and arguing obvious or irrelevant points before getting to the crux of
the dispute. If their client wants to pay them for that busy-work, that’s between them and their client,
but if they had won the case and an award for attorney’s fees, I would have objected that they shouldn’t
be allowed to charge us for time they spent arguing points that we would have given to them anyway. The
hypothetical savings from implementing and enforcing this rule, are not trivial.

So how does game theory predict that the two sides would behave under this rule? Suppose MegaCorp
is suing or being sued by IndieActivist. MegaCorp’s first priority is to win, and if possible to hit
IndieActivist with a huge award for attorney’s fees to discourage other would-be IndieActivists.
MegaCorp doesn’t want to lose, but if they do lose, they don’t much care about the attorney’s fees award
they would have to pay to IndieActivist’s lawyers. In this scenario, they would be expected to
concede very little, disputing trivial points in order to drag out the case as long as possible,
hoping that IndieActivist’s lawyers would run out of time or money and pressure their client to settle.
In other words, MegaCorp would behave about the same as they would under the existing rules.

For IndieActivist, on the other hand, their first priority is to win, but they also care very much
about not having to pay a staggering award for attorney’s fees if they lose. So they would be expected
to concede any points of fact or law, even if favorable to MegaCorp, if those
points are so obvious that they don’t think the judge would be likely
to rule in their favor on those questions anyway. This way, even if IndieActivist loses and has to pay
attorney’s fees to MegaCorp, those fees would be limited to the time spent arguing the actual point
of disagreement that formed the crux of the lawsuit.

Suppose, for example, that Universal had actually sued Lenz
for violating Prince’s copyright by using a 30-second
excerpt of his song in her video. Lenz or her lawyers could have filed a brief conceding all the
obvious points that they would expect Universal’s lawyers to make: Prince was the holder of the
copyright, the copyright had been filed with the Copyright Office, Lenz never sought permission
for using the recording, etc. Very quickly, the whole case could be distilled down to: “Show this
video to the judge and let them decide if it qualifies as ‘fair use’.” Any effort spent arguing
any points beside that, is wasteful. And if the legal system encourages lawyers to rack up billable hours
arguing other points, then the system is wasteful. Concede the obvious, and everybody’s costs
are kept under control.

This only partially addresses the problem of large attorney’s fees, because it still leaves
the fees that are generated in the process of arguing points that the other side wouldn’t
concede. Solving this problem is much harder, because while you can simply eliminate the work
that’s spent on arguing points that the other side would give to you anyway, you can’t eliminate
the work spent on points that are genuinely in dispute, you can only try to make that work shorter
and cheaper. I’ve argued for my own fairly complicatedremedy
in a separate article, but my main point was that legal costs aren’t driven up so much by
the complexity of the law as by the ambiguity in it. The Windows programming interface,
after all, is also very complex, but if you can write a clear description of what you want a simple
program to do, you can often get a programmer to write the program for you for dirt cheap. In arguing
a legal case, on the other hand, the number of possible outcomes grows exponentially with each point
of ambiguity in the law where there’s no way to predict how the judge will interpret a particular
rule.

But still, even if you can’t reduce the ambiguity in how a legal question will be interpreted,
you can avoid a lot of unnecessary attorney’s fees by distilling the case just down to that
particular question. Is it fair use to use a 30-second clip of Prince’s song in a video of a dancing
toddler? Let the judge decide. But if that’s the one and only point that both sides can’t agree
on, then neither side should be able to bill for time spent arguing about anything else.

Perhaps someone mathematically or logically inclined can come up with a better algorithm for avoiding
the billing hours generated by arguing the obvious. I’m not entirely happy with my own solution, because
it still allows MegaCorp to concede absolutely nothing, and to try and bleed IndieActivist dry by
forcing them to argue even the most trivial points. IndieActivist’s lawyer could be reimbursed for
that time if they win and get an award for attorney’s fees, but they might run out of money or
patience before then. To counter this tactic, you could allow either side to seek penalties for
Frivolously Arguing The Super-Obvious. If IndieActivist’s lawyer
wants MegaCorp to concede an obvious point
and MegaCorp won’t do it, IndieActivist could seek a FATSO penalty, and the judge could decide
whether to award them that penalty if the point is really and truly obvious,
without deciding on the merits of the case as a whole. The
penalty doesn’t have to be large enough to hurt MegaCorp, it just has to be large enough
to compensate IndieActivist’s lawyer for their time, so that MegaCorp can’t run them into the ground
by forcing them to argue every point unnecessarily. However, economic game theorists might think of
some unintended consequence of the FATSO rule. Could MegaCorp flood IndieActivist’s lawyer with a gigantic
list of requested concessions, so that if IndieActivist’s lawyer screws up and forgets to concede one
of the points that the judge turns out to consider “obvious”, MegaCorp could hammer them with a FATSO
award too? It’s hard to anticipate all the ways that either party might abuse a new rule of the game.

Meanwhile, under the existing system, while it may be unfair to Universal in some cosmic sense that
they have to pay out $400,000 for sending one mistaken DMCA takedown notice, it would be more unfair
to force the EFF to eat those costs, and in any case the DMCA does clearly allow for an
award of attorney’s fees.
But it would be better for everyone in the long run — especially for the EFF and the kind of
relatively powerless clients that they usually represent — if there were more ways to keep legal
costs from spiraling out of control in the first place.